City of Chicago Hit with Federal Lawsuit over Unlicensed Taxis

CHICAGO--(BUSINESS WIRE)--The growing national battle to curb unlicensed and unregulated taxi
providers took a new direction today when a group of Chicago taxi
owners, drivers and the Illinois Transportation Trade Association (ITTA)
filed a federal lawsuit against the City of Chicago. The lawsuit, the
first in the nation against a city, claims that by failing to enforce
its own rules for taxi services, Chicago is jeopardizing public health
and safety and exposes the city to billion-dollar potential damages.

The suit, filed in the United States District Court for the Northern
District of Illinois, alleges that the City has allowed unlicensed taxi
companies such as UberX, Lyft, and Sidecar to create an unprecedented,
discriminatory system for taxi services:

Where only relatively affluent passengers with both smart phones and
credit cards can obtain service, and then only if the driver chooses
to serve their neighborhood;

Where the unregulated companies can charge whatever rates they like,
including so-called “surge pricing” of up to 8 times normal rates;

Where safety rules – including requirements that drivers and companies
be fully licensed, submit to a full city-administered criminal
background check, carry commercial insurance to cover passengers and
pedestrians, and drive only newer, city-inspected and regulated
vehicles – do not apply.

According to the lawsuit, the City is allowing the unlicensed taxi
companies to discriminate against vulnerable individuals and
communities, slash City tax revenues and seriously damage individuals
and businesses who have invested in purchasing the medallions required
by law for taxi operations. The unregulated companies operate without
complying with the hundreds of City regulations that apply to the
licensed taxi industry and without paying the required taxes.

“We sued the City because it is discriminating against taxi
owners who have played by the rules, paid their taxes and complied with
safety and licensing requirements while the City allows the unregulated
companies – who provide identical services – to make up their own
rules,” said noted Chicago attorney, Michael Shakman, who is
representing the plaintiffs. “This lawsuit is about whether low-income
areas and people with disabilities are going to be left without taxi
services. Taxi companies welcome new technology and competition. Chicago
taxi owners already have smart phone applications that connect customers
with licensed, regulated drivers – while not ignoring those without
them. But people providing identical services should be held accountable
to the public under the same rules.”

The unlicensed companies readily admit they do not comply with local
laws and only enter marketplaces after a period of non-enforcement by
authorities. Other cities including New Orleans, La., Portland, Ore.,
Miami, Fla. and Austin, Tex., have not allowed them to operate unless
they comply with local consumer protection ordinances, licensing, and
safety regulations. City officials in Dallas, Tex. and Seattle, Wash.
have proposed regulations to bring the companies into compliance.

Unlike the requirements imposed on the taxi industry, the city currently
allows the unlicensed taxi companies to:

Use untrained drivers without criminal background checks or chauffeur
licenses;

Engage in price gouging with “surge pricing” rather than adhering to
prices set by the city using sanctioned meters;

Ignore calls from underserved and minority neighborhoods in the city;

Not provide accessible vehicles for people with disabilities;

Refuse to accept cash or Taxi Access Program (TAP) vouchers;

Pay no taxes or annual registration fees;

Operate without taxi-licensed medallions, which the city attempted to
auction at a starting price of $360,000 each in October 2013.

The City of Chicago collects more than $24 million per year in taxes
from the taxi industry. In contrast, the unlicensed taxi companies pay
no taxes to the city, threatening a critical revenue stream at a time of
ongoing economic recovery and budget deficits.

Yesterday, Mayor Emanuel introduced an ordinance in the Chicago City
Council to impose some regulations on unlicensed taxi companies.

“The City’s new proposal is bad policy and the City Council should
reject it,” Shakman said. “It would write into law an absolutely
unnecessary, unfair and discriminatory separate taxi system created by
these unlicensed companies. It does nothing to address major safety
concerns, ignores the loss of millions in City tax revenues, and
guarantees large liability to the City.”

In 2012, several Chicago taxi companies filed a lawsuit directly against
the unlicensed taxi companies. That case was also filed in the United
States District Court for the Northern District of Illinois and is now
in the discovery stage.